By TIOL News Service

MUMBAI, SEPT 25, 2017: THE appellant is a sub-contractor carrying out the job of drilling and blasting at Mithi River. This is part of the overall contract awarded by Mumbai Metropolitan Regional Development Authority (MMRDA) to Reliance Michigan JV (RMJV) for widening and de-silting of Mithi River.

A service tax demand of Rs.12,75,866/- was confirmed against the appellant on the ground that the activity undertaken by them is classifiable under the head of 'dredging service'.

The service of 'dredging' is defined under Section 65(36a) of FA, 1994 as under -

"dredging" includes removal of material including silt, sediments, rocks, sand, refuse, debris, plant or animal matter in any excavating, cleaning, deepening, widening or lengthening, either permanently or temporarily, of any river, port, harbor, backwater or estuary.

The appellant is before the CESTAT.

It is submitted that the appellant's independent activity is only drilling and blasting at Mithi River which does not fall under the definition of dredging service; that the dredging service was provided by their main contractor (RMJV); that it is evident from the confirmation letter dated 30.09.2013 provided by RMJV that the appellant has only provided the service of drilling and blasting and the remaining service of excavation and removing silt was provided by some other sub-contractor M/s. S.K. Construction ;that as per the Master Circular dated 23.08.2007 it is clarified that the sub-contractor need not take registration under service tax and the service tax is to be paid by the main service provider; that demand is time barred.

The AR reiterated the findings given by the lower authorities.

The Bench adverted to the definition of the service of dredging and observed -

+ From the definition, it can be seen that the appellant's activity i.e. drilling and blasting in Mithi River does not fit into any of the service which is provided in the inclusion clause of the dredging service, for the reason that the appellant is carrying out only drilling and blasting . Thereafter the removal of silt, rock, soil after blasting, is carried out by another sub-contractor M/s. S.K. Construction .

+ The Oxford dictionary meaning of "dredging" is-

"Verb: - Clear the bed of (a harbor, river or other area of water) by scooping out mud, weeds, and rubbish with a dredge.

Noun- An apparatus for bringing up objects or mud from a river or seabed by scooping or dragging."

+ From the Dictionary meaning of 'dredging' it can be seen that the meaning is akin to the activity which is provided in the inclusion clause of the "dredging" as per Section 65(36a), therefore, by taking both the definition of "dredging", it is clear that the clearing of river bed by scooping or dragging is a service of dredging. In the present case, the activity is admittedly not similar to scooping or dragging of silt, mud etc. but it is limited to drilling and blasting.

++ The subsequent service i.e. removal of silt, mud, rock etc. is carried out by M/s S.K. Construction . The classification of service in the hands of the individual service provider is to be decided on the basis of that activity alone carried out by the individual service provider and same cannot be linked with the subsequent service provided, in the present case, the service provided by M/s. S.K. Construction and RMJV . The service of drilling and blasting alone does not fall under the dredging service.

The impugned order was set aside and the appeal was allowed.

(See 2017-TIOL-3471-CESTAT-MUM)